SMM Morning Comments (Dec 6): Base Metals Closed Mixed amid Cautious Macro Sentiments

SHANGHAI, Dec 6 (SMM) – Shanghai base metals were trending mixed on Monday morning amid cautious macro sentiments. Meanwhile, their counterparts on LME performed similarly.

LME metals closed mixed in the trading last Friday. Copper dropped 0.55%, lead fell 0.98%, aluminium rose 0.11%, and zinc gained 0.05%.

SHFE metals mostly fell in the trading last Friday. Copper fell 0.04%, lead dropped 1.91%, zinc lost 0.78%, and aluminium rose 0.9%.

Copper: Three-month LME copper opened at $9,478/mt in the overnight trading last Friday and rose rapidly to the highest point at $9,528/mt, then fell to the lowest level at $9,369/mt. It closed at $9,417/mt, a drop of 0.55%. The trading volume was 11,000 lots, and the open interest was 257,000 lots. Three-month LME copper is expected to trade between $9,380-9,480/mt today.

The most traded SHFE 2201 copper contract opened at 69,390 yuan/mt last Friday night, hitting the highest and lowest levels at 69,390 yuan/mt and 69,130 yuan/mt respectively, and closed 0.04% lower at 69,200 yuan/mt. The trading volume was 58,000 lots, and the open interest was 150,000 lots. SHFE copper is expected to trade between 68,900-69,500 yuan/mt today, with spot premiums between 110-530 yuan/mt.

The macro sentiments turned more cautious after the Fed announced to accelerate the bond buying taper, and the Omicron variant of COVID-19 triggered panic in the market. SHFE copper pulled back below 70,000 yuan/mt. The downstream users did not accept the slight rally of prices, and the traders were more willing to lower the prices to promote sales as some imported sources flowed into the market. As such, the spot premiums continued to shrink on Friday. The tight supply was eased by the increase in the input invoices. The prices may not increase significantly as the downstream users refuse to purchase at the current prices.

Aluminium: LME aluminium opened at $2,611/mt last Friday and closed at $2,616/mt, an increase of $3/mt or 0.11%.

The most-traded SHFE 2201 aluminium contract opened at 18,925 yuan/mt during last Friday’s night session, with the highest and lowest prices at 19,075 yuan/mt and 18,870 yuan/mt before closing at 18,965 yuan/mt, up 170 yuan/mt or 0.9%.

The domestic social stocks of aluminium ingots continued to decline. The heating season and the Winter Olympics have not yet had a significant impact on processing companies, but the processing companies in north China may face production restrictions at the end of the year. In the short term, SHFE aluminium is expected to continue to fluctuate within a narrow range.

Lead: Three-month LME lead opened at $2,249.5/mt last Friday and fluctuated between $2,245-2,270/mt in early trading. Then it fell to the lowest point at $2,190/mt and closed at $2,196/mt, down 0.98%, amid higher US debt risks and negative outlook on the economy due to the spread of new COVID-19 variant. LME lead fell below all moving averages during last Friday, and is expected to move downward in the short term.

The most-liquid SHFE 2201 lead contract opened at 15,120 yuan/mt last Friday and decreased 1.91% to settle at 14,920 yuan/mt after hitting the lowest point at 14,860 yuan/mt, with open interest increasing 6,238 lots to 46,729 lots.

Zinc: Three-month LME zinc gained 0.05% to settle at $3,157.5/mt last Friday, with open interest decreasing 131 lots to 262,000 lots. LME stocks across LME-listed warehouses fell by 1,775 mt or 1.14% to 153,350 mt. LME zinc is expected to fluctuate between $3,140-3,190/mt.

The most-traded SHFE 2201 zinc contract fell to 22,870 yuan/mt after opening at 23,170 yuan/mt, but then rose to 22,920 yuan/mt before closing at 22,900 yuan/mt, down 180 yuan/mt or 0.78%, with open interest decreasing by 935 lots to 77,512 lots. The pressure from falling TCs and rising electricity prices on smelters were increasing. Some smelters in Hunan planned to control their output amid cost pressure. North China is subject to air pollution warning, suppressing consumption for galvanised zinc products. Spot transactions were muted as there was no obvious improvement of downstream consumption. The most-traded zinc contract is expected to move between 22,700-23,200 yuan/mt today and #0 domestic Shuangyan zinc may trade at premiums of 20-30 yuan/mt over the SHFE 2201 zinc contract.

Tin: The operating rates of major tin smelters in China recovered slightly last week. Myanmar's ports are still closed due to the pandemic. Inventories of warrants continued to decrease, and the spot market was stable. The SHFE 2201 tin contract moved between 284,000-288,000 yuan/mt during last Friday’s night session. The SHFE 2201 tin contract is expected to move within a narrow range.